Discuss the effect of this revenue increase on the firm’s working capital policy.

Fin/419 fin 419 fin419 week 4 – learning team assignment – working

An increase in revenue can have a significant impact on a firm’s working capital policy. A greater revenue level would usually mean that more cash is coming into the business. This could be used to repay any debts or buy additional assets. This increased liquidity could also help fund operations and investments such as research & development, thus allowing the company to grow its business faster than before.

Additionally, an increase in sales would likely result in greater profits as well – thus giving the firm more money to allocate towards increasing inventory levels or extending payment terms on accounts receivable (AR). This could give them a competitive advantage when it comes to customer service since they’ll be able to offer longer payment periods and/or larger discounts compared with their competitors. A company with a better financial record may be able to access more financing options (e.g. lower interest rates), which could further enhance their ability to efficiently manage working capital.

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